How to Start Profitable Family Business from Scratch 2022

When you enter into an interactive conversation with most individual adults that are working for a small family business in the informal sector, you often here them say “how can I get capital to start my own small business”? in other words, finding a good business idea is not a problem for starting up. This is a mistake.

Whereas, most informal sector workers would complain of a lack of capital as the main bottleneck preventing them from starting the same line of business, they work in.

In this blog post, we will explain why starting a family business is more important now, to help you recover your income lost to Covid-19 impact. 

Have you observed a gradual reduction in the value of your household income?

If your answer is yes, don’t panic because this blog post will help solve the income problem. nowadays, for example, young couples who work as civil servants often argue over what type of family-owned business can help their family to earn extra income to cover children school fees and other recurrent expenses?

This blog post will equally expose you to real-life example of business model challenges, working you through simple earning models to help you start family business from scratch (without previous knowledge).

You will also learn practical tips for starting eBook marketplace business without seed capital (if you have practical experience and work in the private-informal sector).

What is Family Business in the Informal Sector?

There are three components or pillars of family business. These include the family members, business model and ownership structure.

Defining family enterprise

A product-based or services-based small-scale business that is owned by either a single parent or young couples, or any form of self-employed micro-business whose ownership is linked to a nuclear family, and where small business is setup as a retirement strategy to sustain the household income and provide value to local communities, can be described as an informal sector family business.

To further describe a family enterprise in its simplest form, for example in African informal sector settings, most family businesses do not require the hurdles of rigorous planning to setup, neither do they make use of business plan document (if you prepare one for them, family business owners will abandon it).

But, a single parent or civil servant can setup a physical shop offline or online store to sell products to online customers as a goal to escape poverty for their family members.

Why it is important to start up a Family Business

• Self-employed micro-business make it easier for owners to create paid-volunteering jobs and foster student learning and practicing of product marketing and design skills during holidays;

• Family-owned businesses design work per hour using family members talents to render personal services like event planning, physiotherapy, book editing, house painting and graphic design;

• Family-owned micro-enterprises easily build & test new innovative products in response to unmet needs of people within their community;

• Transition purpose: family business owners pass the baton to the next generation 

12 Tips for Starting Family Business from Scratch

• Begin with a local visit to weekday markets around you to spot products that consumers buy often
• Make inquiry of local selling prices range for products (at least 5-10 types) with weekly demands & compare local shop prices with online products price points (is the price high or low?); 
• Refrain from the temptation to start selling a product line imitation of your next-Door competitor
• Do brief online research or ask market-sellers about where you can get producers/suppliers of products.
• Find contact details of 2-3 suppliers & discuss distributorship deals or drop-shipping arrangements
• Young couple’s family business without a seed capital, can begin with early start by drop-shipping durable product like laptop and receive customers’ orders via sherdzon online marketplace.
• Elderly couples should refrain from late start by choosing distributorship model with online shop
• To run daily business operations, employ a mix of labour within and outside your family members

Other critical decisions to by made as a business owner includes: try and ensure you

Obtain pro forma invoice prices valid for 60 days from your suppliers with drop-shipping deals;

Ensure your staff keep daily cash sales and expenses record using free Vyapar bookkeeping app;

Engage in regular marketing of your products via physical word-of-mouth or use social media;

Check your mindset: which business risk do you fear the most? For example, it is easy to start procrastinating that you will start a family business, when you retire from civil service; you may never start.

Choosing the Right Business Model for Family Enterprises

Now that you know the 12 tips for decision making on how to start a product-based enterprise for your own family, the next question that should come to your mind is which business model will you use as a go-to-market strategy? 

Did you know that, apart from capital inadequacies, the inability for most informal sector startups to choose the right business model and review them bi-annually, accounts for the second reason why most micro and small family businesses fail within 1-3 years?

They literally fail to attract paying customers. For example: take the case of a business model problem common In the Nigerian fashion sector, where most female trainees (18-35 years) in tailoring schools/shops acquire fashion designs and cloth sewing skills within 12 months or more.

To gain freedom, these girls mobilize funds to buy a new sewing machine through families’ support.

Alas! after graduating, their strong interest and joy to start sewing cloth for their friends & families, and the goal to make money within their neighborhood suddenly hit a rock.

What business model do these young tailors choose to serve customers? And, why do these business fail to make money?

First, they chose tailoring as a service to provide seasonal/festival-based sewing of cloths for customers. Two months into the season of Christmas or Sallah celebration, tailoring services is a good business model which brings in high income/revenue for female fashion entrepreneurs. This is good news. Isn’t it?

Secondly, during off-festive-season, if you pay regular surprise visits to young tailors’ shop in the afternoon, don’t be shocked if you find many of them sleeping.

Unfortunately, Young tailors are sleeping during work hours because they have settled for a low-level business activity with poor marketing which failed to attract and convert seasonal customers into regular paying customers in and out of season.

How to correct this business model problem: At the beginning stage, you need to be aware that every family business whether small or big business can start dying at any time.

And, if you are serious about launching a small business, don’t skip quarterly review or evaluation of your business model via testing your products for new market opportunities.

What is the Best Approach to Business Model Review?

Start by conducting market research around your products or services to determine product-market-fit. For a brief review to help improve tailoring as a service model, for example, a young female tailor needs to answer five questions and begins with SWOT analysis (strength, weakness, opportunity, threat) approach.

• Do you need a separate savings account to enable you invest seasonal revenue in a cloth brand?
• Can you create a product niche or unique brand like regular t-shirt designs to attract new female or males’ customers?
• Is the location of your material suppliers closer to your business location, to aid bulk clothing materials sourcing at affordable cost/quality?
• How many t-Shirt wears for females can you design, sew and complete per day?
• Will you sell finished t-shirt products to local boutique owners, or attract customer orders via online stores?

Notice how each “yes” response to questions 1 to 5 can help young tailors to identify their available revenue capacity (strength) to invest in production of female t-shirts brand which can open up new opportunities to start selling female wears via online marketplace like sherdzon e-commerce plaform.

You can register as a seller or vendor on Sherdzon plaform with a goal to increase your online sales turnover, improved profitability (weekly earnings) and as well increase the return on investment (ROI) for the t-shirts brand produced by each young female tailors in the informal sector.

In addition, answers to questions 2 will also enable tailors to know if they currently lack the require t-shirt branding skills or needs to learn new skills to cover their area of weakness in creativity and brand designs.   

If you have being thinking about starting your family business, either as a single parent civil servant, young couples or elderly parents that are planning for retirement, you can begin your business journey by partnering with 1-2 female/male young tailors whose sewing machine is idle during off-peak season in your area as a strategy to design unique cloth brand and launch your online business selling homemade cloths for children or women.

Sherdzon online marketplace makes it easier for young entrepreneurs to do Test Marketing of Homemade Fashion Wears, produced locally by new tailors graduating from tailoring schools in Nigeria.

3 Tips for Increased Earnings to grow family business

Earnings obtained from family enterprise could be one of the main income sources for a nuclear family. And so, use these 3 tips to increase your business earnings and family income.

• Cut down operational cost: adopt trade-off techniques for quality raw materials selection from 2-3 suppliers nearest to you, compute transport cost for materials & pay salaries per work done (if necessary).

• Innovate and flexibly invest: co-innovate with young tailors who are creative to build cloth brand designs and invest your free time and savings in brand test marketing/sales of products online. These joint actions can build your monthly earnings through 4x order fulfillments and use 70:30 profit sharing ratio with tailors per order completed.

• Make an eBook: monetize your knowledge (write: proven step-by-step guide to design female Jeans or school bag designs from start to finish) and experience by writing practical handbook guide on how to solve a real-life problem (per sector) and publish your eBook online via Sherdzon eBook publishing for free.

To know more about our Family Business Management Consulting Services, please email us at: help@sherdzon.com or call/WhatsApp: +234 9039345425.

To get help on selecting the right business model for your new or existing family business, you can send your inquiry to help@sherdzon.com or

get in touch with our team of business development service expert from Sherd Social Enterprise.